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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
——————————— 
FORM 10-Q
 ————————————
(Mark One)
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended May 31, 2024
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
Commission File No. 1-11288 
 ————————————
ENERPAC TOOL GROUP CORP.
(Exact name of registrant as specified in its charter)
 ————————————
Wisconsin 39-0168610
(State of incorporation) (I.R.S. Employer Id. No.)
N86 W12500 WESTBROOK CROSSING
MENOMONEE FALLS, WISCONSIN 53051
Mailing address: P. O. Box 3241, Milwaukee, Wisconsin 53201
(Address of principal executive offices)
(262) 293-1500
(Registrant’s telephone number, including area code)
 ————————————
Securities registered pursuant to Section 12(b) of the Act:
Title of each classTicker Symbol(s)Name of each exchange on which registered
Class A common stock, $0.20 par value per shareEPACNYSE
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes  x    No  ¨
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).    Yes  x    No  ¨
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or emerging growth company. See definition of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and "emerging growth company" in Rule 12b-2 of the Exchange Act.
Large Accelerated FilerAccelerated Filer
Non-accelerated FilerSmaller reporting company
Emerging growth company
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.      
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act.):    Yes  ¨    No  
The number of shares outstanding of the registrant’s Class A Common Stock as of June 20, 2024 was 54,300,146.


Table of Contents
TABLE OF CONTENTS
 
 Page No.

FORWARD-LOOKING STATEMENTS AND CAUTIONARY FACTORS
This quarterly report on Form 10-Q contains certain statements that constitute forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995 that involve risks and uncertainties. Such forward-looking statements include statements regarding expected financial results and other planned events, including, but not limited to, anticipated liquidity, anticipated restructuring costs and related savings, anticipated future charges and anticipated capital expenditures. The terms “may,” “should,” “could,” “anticipate,” “believe,” “estimate,” “expect,” “objective,” “plan,” “project” and similar expressions are intended to identify such forward-looking statements. These statements are not guarantees of future performance and involve certain risks, uncertainties and assumptions that are difficult to predict. Therefore, actual future events or results may differ materially from these statements. We disclaim any obligation to publicly update or revise any forward-looking statements as a result of new information, future events or any other reason.
The following is a list of factors, among others, that could cause actual results to differ materially from the forward-looking statements:
supply chain issues, including shortages of adequate component supply that increase our costs or cause delays in our ability to fulfill orders;
failure to estimate customer demand properly may result or could have an adverse impact on our business and operating results and our relationship with customers;
the deterioration of, or instability in, the domestic and international economy and/or in our various end markets, including as a result of geopolitical activity, including the invasion of Ukraine by Russia and international sanctions imposed in response thereto, the armed conflict involving Hamas and Israel, and the attacks on commercial ships in the Red Sea;
decreased demand from customers in the oil & gas industry, including as a result of significant volatility in oil prices resulting from disruptions in the oil markets;
uncertainty over global tariffs or the financial impact of tariffs;
our ability to execute on restructuring actions and on the objectives related to the ASCEND transformation program in order to achieve anticipated incremental operating profit;
logistics challenges, including global freight capacity shortages, significant increases in freight costs or other delays in our ability to fulfill orders and the previously mentioned attacks on commercial ships in the Red Sea;
1


failure to collect on accounts receivable, including in certain foreign jurisdictions where sales are concentrated to a limited number of distributors or agents;
risks related to our reliance on independent agents and distributors for the distribution and service of products;
a significant failure in our information technology (IT) infrastructure, such as unauthorized access to financial and other sensitive data or cybersecurity threats;
a material disruption at a significant manufacturing facility;
competition in the markets we serve;
currency exchange rate fluctuations, export and import restrictions, transportation disruptions or shortages, and other risks inherent in our international operations;
regulatory and legal developments, including litigation, such as product liability and warranty claims;
failure to develop new products and the extent of market acceptance of new products and price increases
our ability to execute on our growth strategy;
our ability to successfully identify, consummate and integrate acquisitions and realize anticipated benefits/results from acquired companies as part of our portfolio management process;
the effects of divestitures and/or discontinued operations, including retained liabilities from, or indemnification obligations with respect to, disposed businesses;
if the operating performance of our businesses were to fall significantly below normalized levels, the potential for a non-cash impairment charge of goodwill and/or other intangible assets, as they represent a substantial amount of our total assets;
a global economic recession;
the impact of rapidly rising interest rates and material, labor, or overhead cost increases;
our ability to comply with the covenants in our debt agreements and fluctuations in interest rates;
our ability to attract, develop, and retain qualified employees;
inadequate intellectual property protection or infringement of the intellectual property of others;
our ability to access capital markets; and
other matters, including those of a political, economic, business, competitive and regulatory nature contained from time to time in our U.S. Securities and Exchange Commission ("SEC") filings, including, but not limited to, those factors listed in the "Risk Factors" section within Item 1A of Part I of our Form 10-K for the fiscal year ended August 31, 2023 filed with the SEC on October 20, 2023.
When used herein, the terms “we,” “us,” “our” and the “Company” refer to Enerpac Tool Group Corp. and its subsidiaries. Reference to fiscal years, such as "fiscal 2024," are to the fiscal year ending on August 31 of the specified year. Enerpac Tool Group Corp. provides free-of-charge access to its Annual Report on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K, and all amendments thereto, through its website, www.enerpactoolgroup.com, as soon as reasonably practicable after such reports are electronically filed with the SEC.
2


PART I—FINANCIAL INFORMATION
Item 1—Financial Statements
ENERPAC TOOL GROUP CORP.
CONDENSED CONSOLIDATED STATEMENTS OF EARNINGS
(In thousands, except per share amounts)
(Unaudited)
Three Months Ended May 31,Nine Months Ended May 31,
 2024202320242023
Net sales $150,389 $156,253 $430,796 $437,595 
Cost of products sold72,506 78,395 207,188 221,464 
Gross profit77,883 77,858 223,608 216,131 
Selling, general and administrative expenses42,101 48,810 125,041 154,116 
Amortization of intangible assets824 1,357 2,480 4,075 
Restructuring charges1,595 2,252 4,393 6,220 
Impairment & divestiture charges  147  
Operating profit33,363 25,439 91,547 51,720 
Financing costs, net3,385 3,250 10,793 9,170 
Other expense, net544 525 2,079 1,948 
Earnings before income tax expense29,434 21,664 78,675 40,602 
Income tax expense6,813 4,688 19,877 10,058 
Net earnings from continuing operations22,621 16,976 58,798 30,544 
Earnings (loss) from discontinued operations, net of income taxes3,157 (4,596)2,535 (6,214)
Net earnings$25,778 $12,380 $61,333 $24,330 
Earnings per share from continuing operations
Basic$0.42 $0.30 $1.08 $0.54 
Diluted$0.41 $0.30 $1.07 $0.53 
Earnings (loss) per share from discontinued operations
Basic$0.06 $(0.08)$0.05 $(0.11)
Diluted$0.06 $(0.08)$0.05 $(0.11)
Earnings per share*
Basic$0.47 $0.22 $1.13 $0.43 
Diluted$0.47 $0.22 $1.12 $0.42 
Weighted average common shares outstanding
Basic54,292 57,052 54,344 56,993 
Diluted54,826 57,432 54,840 57,417 
*The total of Earnings per share from continuing operations and Earnings (loss) per share from discontinued operations may not equal Earnings per share due to rounding.
The accompanying notes are an integral part of these condensed consolidated financial statements.
3


ENERPAC TOOL GROUP CORP.
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(In thousands)
(Unaudited)
 Three Months Ended May 31,Nine Months Ended May 31,
 2024202320242023
Net earnings$25,778 $12,380 $61,333 $24,330 
Other comprehensive income (loss), net of tax
Foreign currency translation adjustments423 2,420 (2,460)8,918 
Pension and other postretirement benefit plans146 115 1,206 337 
Cash flow hedges139 (542)1,125 5 
Total other comprehensive income (loss), net of tax708 1,993 (129)9,260 
Comprehensive income$26,485 $14,373 $61,204 $33,590 
The accompanying notes are an integral part of these condensed consolidated financial statements.

4


ENERPAC TOOL GROUP CORP.
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands, except share and per share amounts)
(Unaudited)
May 31, 2024August 31, 2023
ASSETS
Current assets
Cash and cash equivalents$132,362 $154,415 
Accounts receivable, net107,617 97,649 
Inventories, net79,107 74,765 
Other current assets28,712 28,811 
Total current assets347,798 355,640 
Property, plant and equipment, net36,237 38,968 
Goodwill266,814 266,494 
Other intangible assets, net36,243 37,338 
Other long-term assets62,372 64,157 
Total assets$749,464 $762,597 
LIABILITIES AND SHAREHOLDERS’ EQUITY
Current liabilities
Trade accounts payable$41,664 $50,483 
Accrued compensation and benefits24,305 33,194 
Current maturities of debt 5,000 3,750 
Income taxes payable7,223 3,771 
Other current liabilities43,799 56,922 
Total current liabilities121,991 148,120 
Long-term debt, net190,711 210,337 
Deferred income taxes3,656 5,667 
Pension and postretirement benefit liabilities9,873 10,247 
Other long-term liabilities57,462 61,606 
Total liabilities383,693 435,977 
Shareholders’ equity
Class A common stock, $0.20 par value per share, authorized 168,000,000 shares, issued 54,288,866 and 83,760,798 shares, respectively10,858 16,752 
Additional paid-in capital230,996 220,472 
Treasury stock, at cost, 0 and 28,772,715 shares, respectively (800,506)
Retained earnings245,256 1,011,112 
Accumulated other comprehensive loss(121,339)(121,210)
Stock held in trust(3,777)(3,484)
Deferred compensation liability3,777 3,484 
Total shareholders' equity365,771 326,620 
Total liabilities and shareholders’ equity$749,464 $762,597 
The accompanying notes are an integral part of these condensed consolidated financial statements.
5


ENERPAC TOOL GROUP CORP.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
(Unaudited)
 Nine Months Ended
 May 31, 2024May 31, 2023
Operating Activities
Net earnings$61,333 $24,330 
Less: Earnings (loss) from discontinued operations, net of income taxes2,535 (6,214)
Net earnings from continuing operations58,798 30,544 
Adjustments to reconcile net earnings to net cash provided by operating activities - continuing operations:
Impairment & divestiture charges147  
Depreciation and amortization9,970 12,503 
Stock-based compensation expense8,299 6,482 
Deferred income taxes(4,297)769 
Amortization of debt issuance costs438 756 
Receivable reserve147  
Other non-cash expenses3,300 588 
Changes in components of working capital and other, excluding acquisitions and divestitures:
Accounts receivable(10,450)4,430 
Inventories(3,769)(7,073)
Trade accounts payable(8,972)(26,198)
Prepaid expenses and other assets(5,568)(5,348)
Income tax accounts8,305 4,621 
Accrued compensation and benefits(8,542)6,477 
Other accrued liabilities(8,262)(3,990)
Cash provided by operating activities - continuing operations39,544 24,561 
Cash (used in) provided by operating activities - discontinued operations(2,586)2,470 
Cash provided by operating activities36,958 27,031 
Investing Activities
Capital expenditures(4,970)(7,796)
Working capital adjustment from the sale of business assets(1,133) 
Purchase of business assets(1,402) 
Cash used in investing activities - continuing operations(7,505)(7,796)
Cash used in investing activities (7,505)(7,796)
Financing Activities
Borrowings on revolving credit facility48,000 60,000 
Principal repayments on revolving credit facility(64,000)(24,000)
Principal repayments on term loan(2,500)(625)
Proceeds from issuance of term loan 200,000 
Payment for redemption of revolver (200,000)
Swingline borrowings/repayments, net (4,000)
Payment of debt issuance costs (2,486)
Purchase of treasury shares(32,691)(20,831)
Taxes paid related to the net share settlement of equity awards(3,235)(2,673)
Stock option exercises & other5,200 1,212 
Payment of cash dividend(2,178)(2,274)
Cash (used in) provided by financing activities - continuing operations(51,404)4,323 
Cash (used in) provided by financing activities (51,404)4,323 
Effect of exchange rate changes on cash(102)(2,256)
Net (decrease) increase in cash and cash equivalents(22,053)21,302 
Cash and cash equivalents - beginning of period154,415 120,699 
Cash and cash equivalents - end of period$132,362 $142,001 
The accompanying notes are an integral part of these condensed consolidated financial statements.
6


NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Note 1. Basis of Presentation
General
Enerpac Tool Group Corp. (the "Company") is a premier industrial tools, services, technology and solutions company serving a broad and diverse set of customers in more than 100 countries. The Company has one reportable segment, Industrial Tools & Services ("IT&S"), and an Other operating segment, which does not meet the criteria to be considered a reportable segment.
The accompanying unaudited condensed consolidated financial statements of the Company have been prepared in accordance with United States generally accepted accounting principles ("GAAP") for interim financial reporting and with the instructions of Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by GAAP for complete financial statements. The condensed consolidated balance sheet data as of August 31, 2023 was derived from the Company’s audited financial statements but does not include all disclosures required by GAAP. For additional information, including the Company’s significant accounting policies, refer to the consolidated financial statements and related footnotes in the Company’s fiscal 2023 Annual Report on Form 10-K.
In the opinion of management, all adjustments considered necessary for a fair statement of financial results have been made. Such adjustments consist of only those of a normal recurring nature. Operating results for the three and nine months ended May 31, 2024 are not necessarily indicative of the results that may be expected for the entire fiscal year ending August 31, 2024.
Accumulated Other Comprehensive Loss
The following is a summary of the Company's accumulated other comprehensive loss (in thousands):
May 31, 2024August 31, 2023
Foreign currency translation adjustments$104,728 $102,268 
Pension and other postretirement benefit plans17,188 18,394 
Cash flow hedges(577)548 
Accumulated other comprehensive loss$121,339 $121,210 
Property Plant and Equipment
The following is a summary of the Company's components of property, plant and equipment (in thousands):
May 31, 2024August 31, 2023
Land, buildings and improvements$14,237 $14,070 
Machinery and equipment140,138 136,566 
Gross property, plant and equipment154,375 150,636 
Less: Accumulated depreciation(118,138)(111,668)
Property, plant and equipment, net$36,237 $38,968 
Product Warranty Costs
The Company generally offers its customers an assurance warranty on products sold, although warranty periods may vary by product type and application. The reserve for future warranty claims, which is recorded within the "Other current liabilities" line in the Condensed Consolidated Balance Sheets, is based on historical claim rates and current warranty cost experience. The following summarizes the changes in product warranty reserves for the nine months ended May 31, 2024 and 2023, respectively (in thousands):
 Nine Months Ended
 May 31, 2024May 31, 2023
Beginning balance$856 $1,140 
Provision for warranties269 546 
Warranty payments and costs incurred(547)(557)
Impact of changes in foreign currency rates 23 
Ending balance$578 $1,152 
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Note 2. Revenue from Contracts with Customers
Nature of Goods and Services
The Company generates its revenue under two principal activities, which are discussed below:
Product Sales: Sales of tools, heavy-lifting solutions, and biomedical textiles are recorded when control is transferred to the customer (i.e., performance obligation has been satisfied). For the majority of the Company’s product sales, revenue is recognized at a point in time when control of the product is transferred to the customer, which generally occurs when the product is shipped from the Company to the customer. For certain other products that are highly customized and have a limited alternative use, and for which the Company has an enforceable right of reimbursement for performance completed to date, revenue is recognized over time. We consider the input measure (efforts-expended or cost-to-cost) or output measure as a fair measure of progress for the recognition of over-time revenue associated with these custom products. For a majority of the Company’s custom products, machine hours and labor hours (efforts-expended measurement) are used as a measure of progress.
Service & Rental Sales: Service contracts consist of providing highly trained technicians to perform bolting, technical services, machining and joint-integrity work for our customers. These revenues are recognized over time as our customers simultaneously receive and consume the benefits provided by the Company. We consider the input measure (efforts-expended or cost-to-cost) or output measure as a fair measure of progress for the recognition of over-time revenue associated with service contracts. For a majority of the Company’s service contracts, labor hours (efforts-expended measurement) is used as the measure of progress when it is determined to be a better depiction of the transfer of control to the customer due to the timing and pattern of labor hours incurred. Revenue from rental contracts (less than a year and non-customized products) is generally recognized ratably over the contract term, depicting the customer’s consumption of the benefit related to the rental equipment.
Disaggregated Revenue and Performance Obligations
The Company disaggregates revenue from contracts with customers by reportable segment and product line and by the timing of when goods and services are transferred. See Note 12, "Segment Information" for information regarding our revenue disaggregation by reportable segment and product line.
The following table presents information regarding revenues disaggregated by the timing of when goods and services are transferred (in thousands):
Three Months Ended May 31,Nine Months Ended May 31,
2024202320242023
Revenues recognized at point in time$117,107 $127,216 $331,634 $350,995 
Revenues recognized over time33,282 29,037 99,162 86,600 
Total$150,389 $156,253 $430,796 $437,595 
Contract Balances
The Company's contract assets and liabilities are as follows (in thousands):
May 31, 2024August 31, 2023
Receivables, which are included in accounts receivable, net$107,617 $97,649 
Contract assets, which are included in other current assets5,833 3,989 
Contract liabilities, which are included in other current liabilities2,396 2,927 
Receivables: The Company performs its obligations under a contract with a customer by transferring goods or services in exchange for consideration from the customer. The Company typically invoices its customers as soon as control of an asset is transferred and a receivable for the Company is established. Accounts receivable, net is recorded at face amount of customer receivables less an allowance for doubtful accounts. The Company maintains an allowance for doubtful accounts for expected losses as a result of customers’ inability to make required payments. Management evaluates the aging of customer receivable balances, the financial condition of its customers, historical trends and the time outstanding of specific balances to estimate the amount of receivables that may be collected in the future and records the appropriate provision. The allowance for doubtful accounts was $15.8 million and $16.8 million at May 31, 2024 and August 31, 2023, respectively.
As indicated in the "Concentration of Credit Risk" section below, as of May 31, 2024 and May 31, 2023, the Company was exposed to a concentration of credit risk with an agent as a result of its continued payment delinquency. As of May 31, 2024 and May 31, 2023, the Company had a total bad debt reserve of $13.2 million related to this agent. The allowance for doubtful accounts for this particular agent as of May 31, 2024 represents management's best estimate of the amount probable of collection and considers various factors with the respect to this matter, including, but not limited to: (i) the lack of payment by the agent since the fiscal quarter ended February 28, 2021; (ii) our due diligence on balances due to the agent from its end customers related to sales of our services and
8


products and the known markup on those sales from agent to end customer; (iii) the status of ongoing negotiations with the agent to secure payments; and (iv) legal recourse available to secure payment. Actual collections from the agent may differ from the Company's estimate.
Concentration of Credit Risk: The Company sells products and services through distributors and agents. In certain jurisdictions, those third parties represent a significant portion of our sales in their respective country, which can pose a concentration of credit risk if these larger distributors or agents are not timely in their payments. As of May 31, 2024, the Company was exposed to a concentration of credit risk as a result of the payment delinquency of one of our agents whose accounts receivable represent 10.6% of the Company's outstanding accounts receivable. As of May 31, 2024, the Company has fully reserved for the amounts due from this agent.
Contract Assets: Contract assets relate to the Company’s rights to consideration for work completed but not billed as of the reporting date on contracts with customers. The contract assets are transferred to receivables when the rights become unconditional. The Company has contract assets on contracts that are generally long-term and have revenues that are recognized over time.
Contract Liabilities: As of May 31, 2024, the Company had certain contracts where there were unsatisfied performance obligations and the Company had received cash consideration from customers before the performance obligations were satisfied. The majority of these contracts relate to long-term customer contracts (project durations of greater than three months) and are recognized over time. The Company estimates that substantially all of the $2.4 million of contract liabilities will be recognized in net sales from satisfying those performance obligations within the next twelve months.
Timing of Performance Obligations Satisfied at a Point in Time: The Company evaluates when the customer obtains control of the product based on shipping terms, as control will transfer, depending upon such terms, at different points between the Company's manufacturing facility or warehouse and the customer’s location. The Company considers control to have transferred upon shipment or delivery because (i) the Company has a present right to payment at that time; (ii) the legal title has been transferred to the customer; (iii) the Company has transferred physical possession of the product to the customer; and (iv) the customer has significant risks and rewards of ownership of the product.
Variable Consideration: The Company estimates whether it will be subject to variable consideration under the terms of the contract and includes its estimate of variable consideration in the transaction price based on the expected value method when it is deemed probable of being realized based on historical experience and trends. Types of variable consideration may include rebates, incentives and discounts, among others, which are recorded as a reduction to net sales at the time when control of a performance obligation is transferred to the customer.
Practical Expedients & Exemptions: The Company elected to expense the incremental cost to obtaining a contract when the amortization period for such contracts would be one year or less. The Company does not disclose the value of unperformed obligations for (i) contracts with an original expected length of one year or less and    (ii) contracts for which it recognizes revenue at the amount to which it has the right to invoice for services performed.
Note 3. ASCEND Transformation Program
In March 2022, the Company announced the launch of ASCEND, a transformation program focused on driving accelerated earnings growth and efficiency across the business with the goal of delivering an estimated incremental $40 to $50 million of annual operating profit once fully implemented. In March 2023, the Company announced this estimate had been revised to an incremental $50 to $60 million of annual operating profit as a result of additional ASCEND initiatives and high success rate. As part of ASCEND, the Company is focusing on the following key initiatives: (i) accelerating organic growth go-to-market strategies, (ii) improving operational excellence and production efficiency by utilizing a lean approach and (iii) driving greater efficiency and productivity in SG&A expenses by better leveraging resources to create a more efficient and agile organization.
The Company is implementing the program and originally anticipated investing approximately $60 to $65 million and in March 2023 anticipated that this investment would increase to $70 to $75 million (as disclosed in Note 4, "Restructuring Charges," approximately $10 to $15 million of these investments will be in the form of restructuring charges) over the life of the program, which is expected to be finalized as we exit fiscal 2024. Elements of these investments could include such cash costs as capital expenditures, restructuring costs, third-party support, and incentive costs, which are not available for the senior management team. Total program expenses were approximately $3.6 million and $9.3 million in the three and nine months ended May 31, 2024, respectively, and $8.2 million and $32.9 million in the three and nine months ended May 31, 2023, respectively. Of the total ASCEND program expenses, $1.5 million and $3.9 million for the three and nine months ended May 31, 2024, respectively and $5.5 million and $26.1 million for the three and nine months ended May 31, 2023, respectively, were recorded within SG&A expenses. Further, ASCEND program expenses recorded within cost of goods sold were approximately $0.6 million and $1.0 million for the three and nine months ended May 31, 2024 and $0.4 million and $0.6 million for the three and nine months ended May 31, 2023. Additionally, for the three and nine months ended May 31, 2024, respectively, $1.6 million and $4.4 million were recorded within restructuring expenses with $2.3 million and $6.2 million for the three and nine months ended May 31, 2023, respectively (see Note 4, "Restructuring Charges" below). For fiscal 2024, we expect to incur $10 to $15 million of ASCEND transformation program costs; this range is inclusive of $3 to $5 million of restructuring costs.
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Note 4. Restructuring Charges
The Company has undertaken or committed to various restructuring initiatives, including workforce reductions, leadership changes, plant consolidations to reduce manufacturing overhead, satellite office closures, the continued movement of production and product sourcing to low-cost alternatives, and the centralization and standardization of certain administrative functions. Liabilities for severance are generally to be paid within twelve months, while future lease payments related to facilities vacated as a result of restructuring are to be paid over the underlying remaining lease terms.
On June 27, 2022, the Company approved a new restructuring plan in connection with the initiatives identified as part of the ASCEND transformation program (see Note 3, “ASCEND Transformation Program”) to drive greater efficiency and productivity in global selling, general and administrative resources. The total costs of this plan were then estimated at $6 to $10 million, constituting predominately severance and other employee-related costs to be incurred as cash expenditures impacting both IT&S and Corporate. On September 23, 2022, the Company approved an updated restructuring plan. The restructuring costs of this updated plan (which includes the amounts for the plan approved in June 2022) are estimated at $10 to $15 million. These costs are expected to be incurred over the expected duration of the transformation program, ending in the fourth quarter of fiscal year 2024. The Company recorded $1.6 million and $4.4 million in the three and nine months ended May 31, 2024, respectively, and $2.3 million and $6.2 million in the three and nine months ended May 31, 2023, respectively, of restructuring charges associated with the ASCEND transformation program.
The following summarizes restructuring reserve activity (which for the nine months ended May 31, 2023 excludes $0.6 million of charges associated with ASCEND transformation plan, respectively, associated with the accelerated vesting of equity awards which has no impact on the restructuring reserve) for the IT&S segment and Corporate for the nine months ended May 31, 2024 (in thousands):
Nine Months Ended May 31, 2024
IT&SCorporate
Balance as of August 31, 2023$2,238 $74 
Restructuring charges4,126 235 
Cash payments(3,509)(309)
Impact of changes in foreign currency rates  
Balance as of May 31, 2024$2,855 $ 
Nine Months Ended May 31, 2023
IT&SCorporate
Balance as of August 31, 2022$2,008 $797 
Restructuring charges4,570 1,038 
Cash payments(4,646)(1,734)
Impact of changes in foreign currency rates122 2 
Balance as of May 31, 2023$2,054 $103 
Total restructuring charges (inclusive of the Other operating segment) were $1.6 million and $4.4 million in the three and nine months ended May 31, 2024, respectively, and $2.3 million and $6.2 million in the three and nine months ended May 31, 2023, respectively, being reported in "Restructuring charges."
Note 5. Discontinued Operations and Other Divestiture Activities
On October 31, 2019, as part of our overall strategy to become a pure-play industrial tools and services company, the Company completed the sale of the businesses comprising its former Engineered Components & Systems ("EC&S") segment. This divestiture was considered part of our strategic shift to become a pure-play industrial tools and services company, and therefore, the results of operations are recorded as a component of "Earnings (loss) from discontinued operations, net of income taxes" in the Condensed Consolidated Statements of Earnings for all periods presented. All discontinued operations activity included within the Condensed Consolidated Statements of Earnings and the Condensed Consolidated Statements of Cash Flows for the periods presented relate to impacts from certain retained liabilities.
10


The following represents the detail of "Earnings (loss) from discontinued operations, net of income taxes" within the Condensed Consolidated Statements of Earnings (in thousands):
Three Months Ended May 31,Nine Months Ended May 31,
2024202320242023
Selling, general and administrative (benefit) expenses$(5,392)$5,932 $(5,223)$9,373 
Impairment & divestiture benefit   (1,329)
Operating income (loss)5,392 (5,932)5,223 (8,044)
Other loss, net    
Earnings (Loss) before income tax expense5,392 (5,932)5,223 (8,044)
Income tax expense (benefit)2,235 (1,336)2,688 (1,830)
Earnings (Loss) from discontinued operations, net of income taxes$3,157 $(4,596)$2,535 $(6,214)
Other Divestiture Activities
On July 11, 2023, the Company completed the sale of the Cortland Industrial business, which had been included in the Other operating segment, for net cash proceeds of $20.1 million. In connection with the completion of the sale, the Company recorded a net gain of $6.0 million, inclusive of $0.1 million of purchase price from the customary finalization of working capital negotiations in the first quarter of fiscal 2024. The historical results of the Cortland Industrial business (which had net sales of $6.9 million and $20.2 million, for three and nine months ended May 31, 2023, respectively) are not material to the consolidated financial results.
Note 6. Goodwill, Intangible Assets and Long-Lived Assets
Changes in the gross carrying value of goodwill and intangible assets result from changes in foreign currency exchange rates, business acquisitions, divestitures and impairment charges. The changes in the carrying amount of goodwill for the nine months ended May 31, 2024 are as follows (in thousands):
IT&SOtherTotal
Balance as of August 31, 2023$255,285 $11,209 $266,494 
Impact of changes in foreign currency rates320  320 
Balance as of May 31, 2024$255,605 $11,209 $266,814 
The gross carrying value and accumulated amortization of the Company’s intangible assets are as follows (in thousands):
 May 31, 2024August 31, 2023
Weighted Average
Amortization
Period (Years)
Gross
Carrying
Value
Accumulated
Amortization
Net
Book
Value
Gross
Carrying
Value
Accumulated
Amortization
Net
Book
Value
Amortizable intangible assets:
Customer relationships14$108,473 $97,871 $10,602 $108,292 $95,395 $12,897 
Patents139,791 9,284 507 9,769 9,210 559 
Trademarks and tradenames142,738 2,262 476 2,734 2,197 537 
Indefinite lived intangible assets:
TradenamesN/A24,658  24,658 23,345  23,345 
$145,660 $109,417 $36,243 $144,140 $106,802 $37,338 
The Company estimates that amortization expense will be $0.8 million for the remaining three months of fiscal 2024. Amortization expense for future years is estimated to be: $2.9 million in fiscal 2025, $1.9 million in fiscal 2026, $1.8 million in fiscal 2027, $1.7 million in fiscal 2028, $1.5 million in fiscal 2029 and $1.0 million cumulatively thereafter. The future amortization expense amounts represent estimates and may be impacted by future acquisitions, divestitures, or changes in foreign currency exchange rates, among other causes.
11


Note 7. Debt
The following is a summary of the Company’s long-term indebtedness (in thousands):
May 31, 2024August 31, 2023
Senior Credit Facility
Revolver 16,000 
Term Loan196,250 198,750 
Total Senior Indebtedness196,250 214,750 
Less: Current maturities of long-term debt(5,000)(3,750)
Debt issuance costs(539)(663)
Total long-term debt, less current maturities$190,711 $210,337 

Senior Credit Facility
On September 9, 2022, the Company refinanced its previous senior credit facility with a new $600 million senior credit facility, comprised of a $400 million revolving line of credit and a $200 million term loan, which is scheduled to mature in September 2027. The Company has the option to request up to $300 million of additional revolving commitments and/or term loans under the new facility, subject to customary conditions, including the commitment of the participating lenders. This facility replaces LIBOR with adjusted term SOFR as the interest rate benchmark and provides for interest rate margins above adjusted term SOFR ranging from 1.125% to 1.875% per annum depending on the Company’s net leverage ratio. In addition, a non-use fee is payable quarterly on the average unused amount of the revolving line of credit ranging from 0.15% to 0.3% per annum, based on the Company's net leverage. Borrowings under the credit facility bear interest at adjusted term SOFR plus 1.125% per annum.
The facility contains financial covenants requiring the Company to not permit (i) the net leverage ratio, determined as of the end of each of its fiscal quarters, to exceed 3.75 to 1.00 (or, at the Company’s election and subject to certain conditions, 4.25 to 1.00 for the covenants period during which certain material acquisitions occur and the next succeeding four testing periods) or (ii) the interest coverage ratio, determined as of the end of each of its fiscal quarters, to be less than 3.00 to 1.00. Borrowings under the facility are secured by substantially all personal property assets of the Company and its domestic subsidiary guarantors (other than certain specified excluded assets) and certain of the equity interests of certain subsidiaries of the Company. The Company was in compliance with all covenants under the credit facility at May 31, 2024.
At May 31, 2024, there were $196.3 million in borrowings outstanding under the term loans, no borrowings outstanding under the revolving line of credit and $398.8 million available for borrowing under the revolving line of credit facility after reduction for $1.2 million of outstanding letters of credit issued under the facility.
Note 8. Fair Value Measurements
The Company assesses the inputs used to measure the fair value of financial assets and liabilities using a three-tier hierarchy. Level 1 inputs include unadjusted quoted prices for identical instruments and are the most observable. Level 2 inputs include quoted prices for similar assets and observable inputs such as interest rates, foreign currency exchange rates, commodity rates and yield curves. Level 3 inputs are not observable in the market and include management’s own judgments about the assumptions market participants would use in pricing an asset or liability.
The fair value of the Company’s cash and cash equivalents, accounts receivable, accounts payable and variable rate long-term debt approximated book value at both May 31, 2024 and August 31, 2023 due to their short-term nature and/or the fact that the interest rates approximated market rates. Foreign currency exchange contracts and interest rate swaps are recorded at fair value. The fair value of the Company's foreign currency exchange contracts was a net asset of less than $0.1 million and a net liability of less than $0.1 million at May 31, 2024 and August 31, 2023, respectively. The fair value of the Company's interest rate swap (see Note 9, “Derivatives”, for further information on the Company's interest rate swap) was an asset of $0.8 million and $0.7 million at May 31, 2024 and August 31, 2023, respectively. The fair value of the Company's net investment hedge (see Note 9, “Derivatives” for further information on the Company's net investment hedge) was a liability of $1.0 million and $1.2 million at May 31, 2024 and August 31, 2023, respectively. The fair value of all derivative contracts were based on quoted inactive market prices and therefore classified as Level 2 within the valuation hierarchy.
Note 9. Derivatives
All derivatives are recognized in the balance sheet at their estimated fair value. The Company does not enter into derivatives for speculative purposes. Changes in the fair value of derivatives (not designated as hedges) are recorded in earnings along with the gain or loss on the hedged asset or liability.
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The Company is exposed to market risk for changes in foreign currency exchange rates due to the global nature of its operations. In order to manage this risk, the Company utilizes foreign currency exchange contracts to reduce the exchange rate risk associated with recognized non-functional currency balances. The effects of changes in exchange rates are reflected concurrently in earnings for both the fair value of the foreign currency exchange contracts and the related non-functional currency asset or liability. These derivative gains and losses offset foreign currency gains and losses from the related revaluation of non-functional currency assets and liabilities (amounts included in "Other expense, net" in the Condensed Consolidated Statements of Earnings). The U.S. dollar equivalent notional value of these short duration foreign currency exchange contracts was $6.7 million and $13.8 million at May 31, 2024 and August 31, 2023, respectively. The fair value of outstanding foreign currency exchange contracts was a net asset of less than $0.1 million and net liability of less than $0.1 million at May 31, 2024 and August 31, 2023, respectively. Net foreign currency loss (included in "Other expense" in the Condensed Consolidated Statements of Earnings) related to these derivative instruments are as follows (in thousands):
 Three Months Ended May 31,Nine Months Ended May 31,
 2024202320242023
Foreign currency loss, net$84 $242 $482 $862 
During December 2022, the Company entered into an interest rate swap, with a maturity date of November 30, 2025, for the notional amount of $60.0 million at a fixed interest rate of 4.022% to hedge the floating interest rate of the Company's term loan. The interest rate swap was designated and qualified as a cash flow hedge. The Company uses the interest rate swap for the management of interest rate risk exposure, as an interest rate swap effectively converts a portion of the Company's debt from a floating rate to a fixed rate.
The Company records the fair value of the interest rate swap as an asset or liability on its balance sheet. The change in the fair value of the interest rate swap, a net gain of $0.1 million and less than $0.1 million for the three and nine months ended May 31, 2024, respectively, and a net loss of $0.5 million and a net gain of less than $0.1 million for the three and nine months ended May 31, 2023, respectively, is recorded in other comprehensive income (loss).
The Company also uses interest-rate derivatives to hedge portions of our net investments in non-U.S. subsidiaries (net investment hedge) against the effect of exchange rate fluctuations on the translation of foreign currency balances to the U.S. dollar. For derivatives that are designated and qualify as a net investment hedge in a foreign operation, the net gains or losses attributable to the hedge changes are recorded in other comprehensive income (loss) where they offset gains and losses recorded on our net investments where the entity has non-U.S. dollar functional currency. As of May 31, 2024, the notional amount of cross-currency swaps designated as net investment hedges was $30.5 million. The change in the fair value of the net investment hedge, a net loss of $0.8 million and a net gain $0.1 million for the three and nine months ended May 31, 2024, respectively, and a net loss of $0.3 million and $0.6 million for the three and nine months ended May 31, 2023, respectively, is recorded in other comprehensive income (loss).
Note 10. Earnings per Share and Shareholders' Equity
The Company's Board of Directors has authorized the repurchase of shares of the Company's common stock under publicly announced share repurchase programs. Since the inception of the initial share repurchase program in fiscal 2012, the Company has repurchased 29,938,482 shares of common stock for $833.2 million. The Company suspended the initial share repurchase program in response to the COVID-19 pandemic in the third quarter of fiscal 2020. In March 2022, the Company's Board of Directors rescinded its prior share repurchase authorization and approved a new share repurchase program authorizing the repurchase of a total of 10,000,000 shares of the Company's outstanding common stock. The Company repurchased 1,165,767 shares for $32.7 million in the nine months ended May 31, 2024 and repurchased 843,689 shares for $20.8 million in the nine months ended May 31, 2023. As of May 31, 2024, the maximum number of shares that may yet be purchased under the program is 2,860,748 shares.
In December 2023, the Company's Board of Directors authorized the retirement of the Company's repurchased shares, and the Company retired 29,841,209 treasury shares. The initial share retirement resulted in reductions of $6.0 million in Class A Common Stock and $824.6 million in Retained Earnings reflected in the Condensed Consolidated Balance Sheets at May 31, 2024. Shares repurchased after December 18, 2023 were retired upon repurchase. The Company repurchased and retired 71,536 shares during the three months ended May 31, 2024.
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The reconciliation between basic and diluted earnings per share is as follows (in thousands, except per share amounts):
 Three Months Ended May 31,Nine Months Ended May 31,
 2024202320242023
Numerator:
Net earnings from continuing operations$22,621 $16,976 $58,798 $30,544 
Net earning (loss) from discontinued operations3,157 (4,596)2,535 (6,214)
Net earnings$25,778 $12,380 $61,333 $24,330 
Denominator:
Weighted average common shares outstanding - basic54,292 57,052 54,344 56,993 
Net effect of dilutive securities - stock based compensation plans534 380 496 424 
Weighted average common shares outstanding - diluted54,826 57,432 54,840 57,417 
Earnings per share from continuing operations:
Basic$0.42 $0.30 $1.08 $0.54 
Diluted$0.41 $0.30 $1.07 $0.53 
Earnings (Loss) per share from discontinued operations:
Basic$0.06 $(0.08)$0.05 $(0.11)
Diluted$0.06 $(0.08)$0.05 $(0.11)
Earnings per share:*
Basic$0.47 $0.22 $1.13 $0.43 
Diluted$0.47 $0.22 $1.12 $0.42 
Anti-dilutive securities from stock based compensation plans (excluded from earnings per share calculation)1 397 128 1,067 
*The total of Earnings per share from continuing operations and Loss per share from discontinued operations may not equal Earnings per share due to rounding.














14


The following table illustrates the changes in the balances of each component of shareholders' equity for the nine months ended May 31, 2024 (in thousands):
 Common StockAdditional
Paid-in
Capital
Treasury
Stock
Retained
Earnings
Accumulated
Other
Comprehensive
Loss
Stock
Held in
Trust
Deferred
Compensation
Liability
Total
Shareholders’
Equity
 Issued
Shares
Amount
Balance at August 31, 202383,761 $16,752 $220,472 $(800,506)$1,011,112 $(121,210)$(3,484)$3,484 $326,620 
Net earnings— — — — 17,738 — — — 17,738 
Other comprehensive income, net of tax— — — — — 370 — — 370 
Stock contribution to employee benefit plans and other2  51 — — — — — 51 
Vesting of equity awards118 23 (23)— — — — —  
Cash dividend ($0.04 per share) true-up— — — — 21 — — — 21 
Treasury stock repurchases— — — (26,116)— — — — (26,116)
Stock based compensation expense— — 2,717 — — — — — 2,717 
Stock option exercises83 17 2,193 — — — — — 2,210 
Tax effect related to net share settlement of equity awards— — (2,025)— — — — — (2,025)
Stock issued to, acquired for and distributed from rabbi trust3 1 89 — — — (92)92 90 
Balance at November 30, 202383,967 $16,793 $223,474 $(826,622)$1,028,871 $(120,840)$(3,576)$3,576 $321,676 
Net earnings— — — — 17,817 — — — 17,817 
Other comprehensive loss, net of tax— — — — — (1,207)— — (1,207)
Stock contribution to employee benefit plans and other1 — 35 — — — — — 35 
Vesting of equity awards105 21 (21)— — — — —  
Stock based compensation expense— — 2,810 — — — — — 2,810 
Stock option exercises21 5 472 — — — — — 477 
Tax effect related to net share settlement of equity awards— — (953)— — — — — (953)
Stock issued to, acquired for and distributed from rabbi trust26 5 258 — — — (201)201 263 
Treasury stock repurchases— — — (3,992)— — — — (3,992)
Treasury stock retired(29,867)(5,973)— 830,614 (824,641)— — —  
Balance at February 29, 202454,253 $10,851 $226,075 $ $222,047 $(122,047)$(3,777)$3,777 $336,926 
Net earnings— — — — 25,778 — — — 25,778 
Other comprehensive income, net of tax— — — — — 708 — — 708 
Stock contribution to employee benefit plans and other2 1 74 — — — — — 75 
Vesting of equity awards14 2 (2)— — — — —  
Stock based compensation expense— — 2,772 — — — — — 2,772 
Stock option exercises92 18 2,213 — — — — — 2,231 
Tax effect related to net share settlement of equity awards— — (136)— — — — — (136)
Treasury stock repurchased and retired(72)(14)— — (2,569)— — — (2,583)
Balance at May 31, 202454,289 $10,858 $230,996 $ $245,256 $(121,339)$(3,777)$3,777 $365,771 








15


The following table illustrates the changes in the balances of each component of shareholders' equity for the nine months ended May 31, 2023 (in thousands):
 Common StockAdditional
Paid-in
Capital
Treasury
Stock
Retained
Earnings
Accumulated
Other
Comprehensive
Loss
Stock
Held in
Trust
Deferred
Compensation
Liability
Total
Shareholders’
Equity
 Issued
Shares
Amount
Balance at August 31, 202283,397 $16,679 $212,986 $(742,844)$966,751 $(134,961)$(3,209)$3,209 $318,611 
Net earnings— — — — 7,453 — — — 7,453 
Other comprehensive income, net of tax— — — — — 6,024 — — 6,024 
Stock contribution to employee benefit plans and other3 1 41 — — — — — 42 
Vesting of equity awards84 17 (17)— — — — —  
Stock based compensation expense— — 2,155 — — — — — 2,155 
Stock option exercises42 8 922 — — — — — 930 
Tax effect related to net share settlement of equity awards— — (969)— — — — — (969)
Stock issued to, acquired for and distributed from rabbi trust3 1 76 — — — (30)30 77 
Balance at November 30, 202283,529 $16,706 $215,194 $(742,844)$974,204 $(128,937)$(3,239)$3,239 $334,323 
Net earnings— — — — 4,497 — — — 4,497 
Other comprehensive income, net of tax— — — — — 1,243 — — 1,243 
Stock contribution to employee benefit plans and other2 — 49 — — — — — 49 
Vesting of equity awards173 34 (34)— — — — —  
Stock based compensation expense— — 2,120 — — — — — 2,120 
Tax effect related to net share settlement of equity awards— — (1,505)— — — — — (1,505)
Stock issued to, acquired for and distributed from rabbi trust28 6 55 — — — (81)81 61 
Balance at February 28, 202383,732 $16,746 $215,879 $(742,844)$978,701 $(127,694)$(3,320)$3,320 $340,788 
Net earnings— — — — 12,380 — — — 12,380 
Other comprehensive income, net of tax— — — — — 1,993 — — 1,993 
Stock contribution to employee benefit plans and other2 1 58 — — — — — 59 
Vesting of equity awards12 2 (2)— — — — —  
Treasury stock repurchases— — — (20,831)— — — — (20,831)
Stock based compensation expense— — 2,207 — — — — — 2,207 
Stock option exercises2 — 43 — — — — — 43 
Tax effect related to net share settlement of equity awards— — (110)— — — — — (110)
Stock issued to, acquired for and distributed from rabbi trust4 1 89 — — — (85)85 90 
Balance at May 31, 202383,752 $16,750 $218,164 $(763,675)$991,081 $(125,701)$(3,405)$3,405 $336,619 
16


Note 11. Income Taxes
The Company's global operations, acquisition activity (as applicable) and specific tax attributes provide opportunities for continuous global tax planning initiatives to maximize tax credits and deductions. Comparative earnings before income taxes, income tax expense and effective income tax rates from continuing operations are as follows (dollars in thousands):
 Three Months Ended May 31,Nine Months Ended May 31,
 2024202320242023
Earnings from continuing operations before income tax expense$29,434 $21,664 $78,675 $40,602 
Income tax expense6,813 4,688 19,877 10,058 
Effective income tax rate23.1 %21.6 %25.3 %24.8 %
The Company’s earnings from continuing operations before income taxes include earnings from both U.S. and foreign jurisdictions. As several foreign tax rates are higher than the U.S. tax rate of 21%, the annual effective tax rate is impacted by foreign rate differentials, withholding taxes, losses in jurisdictions where no benefit can be realized, and various aspects of the U.S. Tax Cuts and Jobs Act, such as the Global Intangible Low-Taxed Income and Foreign-Derived Intangible Income provisions.
The effective tax rate for the three months ended May 31, 2024 was 23.1%, compared to 21.6% for the comparable prior-year period. The effective tax rate in each time period was impacted by year-to-date losses and deductions in jurisdictions where no tax benefit can be realized. The higher effective tax rate for the three months ended May 31, 2024 was primarily driven by the full year impacts of withholding tax related to current and future distributions, while the effective tax rate for the nine months ended May 31, 2024 is comparable to the prior-year period. Both the current and prior-year effective income tax rates include the impact of non-recurring items.
Note 12. Segment Information
The Company is a global manufacturer of a broad range of industrial products and solutions. The IT&S reportable segment is primarily engaged in the design, manufacture and distribution of branded hydraulic and mechanical tools and in providing services and tool rental to the infrastructure; industrial maintenance; repair and operations; oil & gas; mining; alternative and renewable energy; civil construction and other markets. The Other segment is included for purposes of reconciliation of the respective balances below to the condensed consolidated financial statements.
The following tables summarize financial information by reportable segment and product line (in thousands):    
 Three Months Ended May 31,Nine Months Ended May 31,
 2024202320242023
Net Sales by Reportable Segment & Product Line
IT&S Segment
Product$117,742 $117,868 $330,606 $320,980 
Service & Rental28,194 26,258 87,187 81,346 
145,936 144,126 417,793 402,326 
Other Segment4,453 12,127 13,003 35,269 
$150,389 $156,253 $430,796 $437,595 
Operating Profit (Loss)
IT&S Segment$41,048 $36,207 $114,028 $93,284 
Other Segment1,253 1,965 3,144 4,545 
Corporate(8,938)(12,733)(25,625)(46,109)
$33,363 $25,439 $91,547 $51,720 
17


May 31, 2024August 31, 2023
Assets
IT&S Segment$618,479 $632,113 
Other Segment28,079 28,127 
Corporate102,906 102,357 
$749,464 $762,597 

In addition to the impact of changes in foreign currency exchange rates, the comparability of segment and product line information is impacted by acquisition/divestiture activities, impairment and divestiture charges, restructuring costs and related benefits. Corporate assets, which are not allocated, principally represent cash and cash equivalents, property, plant and equipment, Right of Use ("ROU") assets, capitalized debt issuance costs and deferred income taxes.
Note 13. Commitments and Contingencies
The Company had outstanding letters of credit of $8.0 million and $8.6 million at May 31, 2024 and August 31, 2023, respectively, the majority of which relate to commercial contracts and self-insured workers' compensation programs.
As part of the Company's global sourcing strategy, we have entered into agreements with certain suppliers that require the supplier to maintain minimum levels of inventory to support certain products for which we require a short lead time to fulfill customer orders. We have the ability to notify the supplier that they no longer need maintain the minimum level of inventory should we discontinue manufacturing of a product during the contract period; however, we must purchase the remaining minimum inventory levels the supplier was required to maintain within a defined period of time.
The Company is a party to various legal proceedings that have arisen in the normal course of business. These legal proceedings include regulatory matters, product liability, breaches of contract, employment, personal injury and other disputes. The Company has recorded reserves for loss contingencies based on the specific circumstances of each case. Such reserves are recorded when it is probable a loss has been incurred and can be reasonably estimated. The Company maintains a policy to exclude from such reserves an estimate of legal defense costs. In the opinion of management, resolution of these contingencies is not expected to have a material adverse effect on the Company’s financial position, results of operations or cash flows.
Additionally, in fiscal 2019, the Company provided voluntary self-disclosures to both Dutch and U.S. authorities related to sales of products and services linked to the Crimea region of Ukraine, which sales potentially violated European Union and U.S. sanctions provisions. Although the U.S. investigation closed without further implication, the Dutch investigation continued. The Dutch Investigator concluded his investigation in March 2022 and provided the results to the Public Prosecutor's office for review. Specifically, the Investigator concluded that the sales transactions violated EU sanctions. The conclusion in the Investigator's report was consistent with the Company's understanding of what could be stated in the report and supported the Company to record an expense in the fiscal year-ended August 31, 2021, representing the low end of a reasonable range of financial penalties the Company may incur as no other point within the range was deemed more probable. The Company has not adjusted its estimate of financial penalties as a result of the completion of the investigation in the nine months ended May 31, 2024. While there can be no assurance of the ultimate outcome of the matter, the Company currently believes that there will be no material adverse effect on the Company's financial position, results of operations or cash flows from this matter.
Note 14. Leases
The Company has operating leases for real estate, vehicles, manufacturing equipment, IT equipment and office equipment (the Company does not have any significant financing leases). Our leases typically range in term from 3 to 15 years and may contain renewal options for periods up to 5 years at our discretion. Operating leases are recorded as operating lease ROU assets in “Other long-term assets” and operating lease liabilities in “Other current liabilities” and “Other long-term liabilities” of the Condensed Consolidated Balance Sheets. There have been no material changes to our operating lease ROU assets and operating lease liabilities during the nine months ended May 31, 2024.
The components of lease expense were as follows (in thousands):
Three Months Ended May 31,Nine Months Ended May 31,
2024202320242023
Lease Cost:
Operating lease cost$3,193 $3,324 $9,379 $9,943 
Short-term lease cost452 612 1,561 1,696 
Variable lease cost582 836 2,233 3,059 
18



Supplemental cash flow and other information related to leases were as follows (in thousands):
Nine Months Ended May 31,
20242023
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows from operating leases$9,086 $9,845 
Right-of-use assets obtained in exchange for new lease liabilities:
Operating leases2,940 1,418 


Item 2 – Management’s Discussion and Analysis of Financial Condition and Results of Operations
Enerpac Tool Group Corp. is a premier industrial tools, services, technology, and solutions company serving a broad and diverse set of customers and end markets for mission-critical applications in more than 100 countries. The Company makes complex, often hazardous jobs possible safely and efficiently. The Company's businesses are global leaders of high pressure hydraulic tools, controlled force products and solutions for precise positioning of heavy loads that help customers safely and reliably tackle some of the most challenging jobs around the world. The Company was founded in 1910 and is headquartered in Meno